Lease accounting for retailers – the biggest-ever accounting change?
The FASB and the IASB are currently working together to revise lease accounting standards – the purpose of their efforts is to reconcile treatments under U.S. GAAP and international financial reporting standards. A joint discussion paper has been published and the Boards have received initial comments. These changes are likely to have a very significant impact on retailers’ financial statements – and some concerns have already been raised. The time to engage clients and highlight the issues is now! This paper describes the proposed treatments and their potential impacts, the most important of which are:
- Under the new rules essentially all leases will be capitalised.
- The new approach will be a “right-of-use” approach.
- The distinction between operating and finance/capital leases will be removed.